A little-known part of Amazon is growing fast — and directly competes with Google and Facebook

Amazon may have a surprise winner in a service that directly competes with Google and Facebook's bread-and-butter business: online advertising.

According to Amazon's latest earnings, the "other" revenue from its North America business — believed to be made up mostly of its online advertising sales — saw the biggest year-over-year jump of any part of Amazon, at 60% in 2016. It recorded $1.3 billion in annual revenue.

Though that's tiny compared with Google's $80 billion in ad revenue, it shows Amazon has been ramping up its online advertising offerings and could one day be a major threat in the industry.

In fact, during Amazon's earnings call with investors on Thursday, UBS analyst Eric Sheridan pointed out this growth, asking where the company saw its advertising business going longer term.

Amazon's CFO, Brian Olsavsky, didn't share much, stressing it's "very early," but he did agree that the company's online advertising business was a "good strategy" for it.

"Our goals there are to be helpful to customers and enhance their shopping and viewing experiences, mostly with targeted recommendations," Olsavsky said during the call. "We think that's a good strategy rather than invasive things that take away from the shopping experience."

Olsavsky also said "sponsored product" ads were "off to a great start" and a "very effective way" to reach interested customers, adding that the company was working on some pre-roll video ads as well.

"For the most part, we like the progression," he said. "We are balancing customer experience with advertising at all times, and we like the team that's working on it."

Overlooked part of the business

Though Amazon rarely talks about its sprawling advertising business, there has been some speculation that it could end up becoming a major part of the company's overall business.

Sheridan of UBS wrote in a recent note that Amazon was continuing to expand its marketing platform by offering more "sophisticated and targeted" advertising solutions, though its revenue is still small.

According to Bloomberg's Shira Ovide and Leila Abboud, Amazon's ad business is estimated to have generated roughly $1.2 billion in 2016. If you apply Facebook's operating margin, Amazon's ad business would have made $395 million in operating income last year, a solid 18% of Amazon's total operating income.

During the earnings call, Darin Manney, Amazon's head of investor relations, cautioned against making a big deal out of the jump in "other" revenue, stressing that it included revenue from the company's cobranded credit-card arrangements and other types of advertising deals.

Still, Amazon seems to be drawing a lot of attention from industry bigwigs, including WPP CEO Martin Sorrell, who, according to Bloomberg, recently said: "The company that would worry me if I was a client — or I think worries our clients, more than Google and Facebook — is Amazon."